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Market Update Tsys trading weaker, led by the front end as the mkt prepares to digest $151bln in bills and $28bln in 2Y notes being auctioned this aft, 10Y 2.902 (+2.bps), 2Y 2.22% new high & the WI 2Y 2.255% the highest since 2008, 20bps above last month’s auction level. Tsy auctions conclude with $35bln 5Y tomorrow and $29bln 7Y Thursday.  Bloomberg Barclays estimates only 0.12yr duration extension March 1st in line with average for past decade.   Equities higher in Europe yet S&P futures sharply lower ( -18.25), Walmart down 6.55 pre-mkt. Q4 eps missed ($1.33 vs $1.37) while guidance for this yr $4.75-$5.00 vs $5.13 est. Crude higher for a 4th day, 62.35 – comments from OPEC that the supply glut is declining at a faster pace. GOCs trading weaker, outperforming tsys 1-3bps – spreads across the curve at  new eight month lows.

News headlines

Dollar Rises With Treasury Yields; Stocks Struggle: Markets Wrap (Bloomberg) Treasuries fell, with investors driving the benchmark yield up to the highest level in four years, as the dollar advanced with oil futures in New York. European shares pared earlier gains and U.S. futures dropped. Debt investors appeared to be trading with caution as Treasury markets reopened after the Presidents’ Day break. Declines in auto and banking shares depressed the Stoxx Europe 600 index, after a pullback in equities emerged in Asia after several days of increases, with more than 1 percent declines for benchmarks in Japan and South Korea. The VIX index of S&P 500 volatility increased for a second day. The yen weakened, and the yield on 10-year Treasuries eased after rising as high as 2.93 percent.

Goldman Sees U.S. Interest-Cost Surge on Yield, Deficit Rise (Bloomberg) An historic expansion in U.S. borrowing during a period of economic growth, alongside rising bond yields, will cause a surge in the cost of servicing American debt, according to Goldman Sachs Group Inc. “Federal fiscal policy is entering uncharted territory,” Goldman analysts including Alec Phillips in Washington wrote in a Feb. 18 note to clients. “In the past, as the economy strengthens and the debt burden increases, Congress has responded by raising taxes and cutting spending. This time around, the opposite has occurred.”

Latvian Central Banker Fires Back in Deepening Corruption Scandal (Bloomberg) The embattled head of Latvia’s central bank denied seeking bribes and accused two of the country’s lenders of conspiring against him as the crisis engulfing the Baltic nation’s banking system deepened. “I have taken the decision not to resign,” Ilmars Rimsevics, the Bank of Latvia’s governor and representative to the European Central Bank, told reporters at a press conference in Riga on Tuesday. “I am not guilty.”

HSBC Falls as Earnings Miss in Last Results Under Gulliver (Bloomberg) Stuart Gulliver’s final set of results at HSBC Holdings Plc weren’t quite the swansong he’d hoped for as he hands the reins over to his long-term lieutenant, John Flint. Europe’s largest bank missed estimates for fourth-quarter revenue and profit as it became the latest firm to take losses from two high-profile corporate failures and post a sharp decline in trading income at its investment bank. HSBC also said share buybacks were on hold, possibly through the first half, while it sells capital-boosting securities.

Walmart shakes off bread scandal as Canadian sales rally in Q4 (BNN) Walmart is emerging from an alleged industry-wide bread price-fixing scandal no worse for wear, with a crucial fourth-quarter sales metric rallying the most in almost two years. The Bentonville, Arkansas-based retailer said on Tuesday its total sales in this country rose 3.4 per cent in the three months ending January 31. Meanwhile, sales at stores that were open for more than a year rose 2.9 per cent, the strongest quarterly rally since the period ending April 29, 2016.

Canada province readies housing plan amid affordability crisis (Reuters) The British Columbia government will unveil its long-awaited housing strategy on Tuesday, taking aim at skyrocketing real estate prices and soaring rents that have crippled affordability in the West Coast Canadian province, particularly in Vancouver.

TSX futures weighed down by higher bond yields (Reuters) U.S. Treasury 10-year yields US1OYT=RR, the benchmark for global borrowing costs, hit four-year highs of 2.9042 percent in early trade on Tuesday. March futures on the S&P TSX index SXFc1 were down 0.44 percent at 7:15 a.m. ET. Wholesale trade date is expected at 8:30 a.m. ET. Canada’s main stock index rose on Friday as a boost from the heavyweight energy sector helped the market rack up its best weekly performance in nearly two years. 

Overnight markets

Overview: US 10yr note futures are down -0.207% at 120-11, S&P 500 futures are down -0.66% at 2717, Crude oil futures are up 0.54% at $62.01, Gold futures are down -1.09% at $1341.4, DXY is up 0.6% at 89.632, CAD/USD is up 0.34% at 0.7934. 

US Economic Data

There is no US Economic data for today.

Canadian Economic Data

Disclosure and Disclaimer

The following sources of information have been, or may have been, used partially or in their entirety to compile the herein provided CTI Capital Securities Inc. (“CTI Capital”) ‘Morning Comments.’ CTI Capital believes these sources to be generally reliable, however, as said sources are varied and from third parties, CTI Capital cannot guarantee the accuracy or completeness of said information: Canadian Press (CP); Bloomberg News (BN); Wall Street Journal (WSJ); Stone & McCarthy Research Associates (SMRA); New York Times (NYT); Financial Times (FT); Market News International (MNI); Globe and Mail; Associated Press (AP); CNW Group (CNW); Reuters; Business News Network (BNN); Market Watch; and others.

Ivan Greenstein, Stephan Buu, Hugues Savard

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

Tel : (514)-861-0240
Fax: (514)-861-3230

Market Update Tsys trading higher, near top of o/n range, despite higher global stocks, 10Y 2.88% (-2.9bps), modest volume in TY futures (275k). Tsys off the highs after a strong rise in Jan Housing Starts  to 1.326mln rate the highest since October 2016,  + 9.7% m/m vs 3.5% exp.  Tsys are bid despite higher stocks thou S&P futures are well off the highs +3.5vs +12 earlier.  Tsy curve ~4bps flatter with long end outperforming, similar to bull flattening in gilts & bunds – the only data being weak UK retail sales. Citi recommended buying European debt and Barclays recommends going long tsys, according to MNI.  GOCs higher, in line with tsys, provis unch with supply unlikey given half day.

News headlines

U.S. Housing Starts Reach Highest Level in More Than a Year (Bloomberg) U.S. new-home construction rose in January to the highest level since October 2016, helped by a surge in apartment building, as momentum in the housing market continues into 2018, government figures showed Friday.

U.K. Retail Sales Barely Grow as Consumers Subdued by Inflation (Bloomberg) U.K. retail sales barely grew in January, more evidence consumers are reluctant to splash out amid a squeeze from rising prices.Sales increased 0.1 percent from December, far below the 0.5 percent gain forecast by economists in a Bloomberg survey. From a year earlier, sales rose 1.6 percent, the weakest for a January in four years 

World shares set for best week since 2011, dollar hits lowest since 2014 (Reuters) World shares were set to post their best week of gains in six years on Friday after two consecutive weeks spent in the red, shrugging off a rise in global borrowing costs while the dollar hit its lowest level since 2014. 

Trudeau ratchets up pipeline pressure on British Columbia (TheGlobeandMail) Prime Minister Justin Trudeau has increased the pressure on British Columbia in the dispute over the Kinder Morgan pipeline expansion, saying the province’s proposal to block the project risks alienating Alberta and derailing any consensus on Canada’s climate-change plan. 

S.E.C. Blocks Chinese Takeover of Chicago Stock Exchange (NYTimes) A federal securities regulator on Thursday struck down the proposed $20 million acquisition of a Chicago-based trading hub, the Chicago Stock Exchange, by a Chinese-owned company. The Securities and Exchange Commission said it blocked the deal because of a lack of transparency in the details, including an inability to identify who exactly would control the exchange.

Cracks Appear in Credit Funds as Investors Head for the Exit (Bloomberg) Global bond funds saw the fifth-largest week of redemptions ever last week, amid expectations of higher interest rates, according to Bank of America Merrill Lynch, citing EPFR Global fund flow data.

 Overnight markets

Overview: US 10yr note futures are up 0.117% at 120-19, S&P 500 futures are up 0.01% at 2734.25, Crude oil futures are up 0.05% at $61.37, Gold futures are up 0.21% at $1358.1, DXY is up 0.34% at 88.895, CAD/USD is up 0.34% at 0.7986. 

US Economic Data

Canadian Economic Data

Disclosure and Disclaimer

The following sources of information have been, or may have been, used partially or in their entirety to compile the herein provided CTI Capital Securities Inc. (“CTI Capital”) ‘Morning Comments.’ CTI Capital believes these sources to be generally reliable, however, as said sources are varied and from third parties, CTI Capital cannot guarantee the accuracy or completeness of said information: Canadian Press (CP); Bloomberg News (BN); Wall Street Journal (WSJ); Stone & McCarthy Research Associates (SMRA); New York Times (NYT); Financial Times (FT); Market News International (MNI); Globe and Mail; Associated Press (AP); CNW Group (CNW); Reuters; Business News Network (BNN); Market Watch; and others.

Ivan Greenstein, Stephan Buu, Hugues Savard

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

Tel : (514)-861-0240
Fax: (514)-861-3230

Market Update Tsys trading lower across the curve, off the early Europe lows which saw the 10Y reach above 2.94%, a new 4-year high, on heavy volume in TY futures (>560k). JPY rose to a new 15 mth high as Japanese FM said there was no need to intervene in xcy mkts.  Heavy data slate this morning with PPI, claims & TICs flows as well as a $7bln 30Y TIPS auction. S&P futures +10pts, Euro stocks +0.90%, crude slighty weaker 60.55. Gilts sharply lower led by the long end, 30Y +5bps @ 2.065, a new high since last Feb, large 0.7bp  tail in this morning’s 40Y gilt reopening. GOCs lower in line with tsys, the 10Y rising above 2.40% resistance earlier, now 2.38%. Domestic calendar has Existing home sales,. Provis spreads tighter yest on ‘risk on’, CHT 10Y , new 2.6% March 2028 was well recived clsing  36/35.5. 

News headlines

U.S. Stocks Rally as 10-Year Yield Reaches 2.9%: Markets Wrap (Bloomberg) U.S. stocks extended a rebound while Treasury yields rose to a four-year high as economic data supported expectations that the Federal Reserve will maintain a gradual approach to raising interest rates. The S&P 500 Index climbed for a fourth day as banks and durable-goods makers rallied, returning the gauge to a gain for the year after it fell more than 10 percent from a January peak. Gold rallied and the dollar slumped as the 10-year yield topped 2.9 percent.

Bond Traders Swarm 2019 Fed-Hike Bets After Inflation Surprise (Bloomberg) Bond traders, seeking a way to bet on more Federal Reserve rate hikes, are setting their sights on 2019. After a Wednesday report showed consumer prices rose in January by more than projected, traders used eurodollar futures to express their view that central bankers have a clearer path to tighten. The expected number of increases from now until the end of next year is up to four, from 3.6 before the inflation report. In contrast, the odds of a move in March haven’t changed much, rising to about 90 percent from around 85 percent ahead of the data.

Zuma’s Exit Ends ‘One-Man Disaster’ That Roiled His Nation (Bloomberg) Before he was pushed from office, South African President Jacob Zuma went from fighting apartheid to facing multiple accusations of corruption during a political career that spanned almost six decades. His resignation will bring an end to an ignominious tenure that undermined the nation’s democracy and crippled the economy.

Dollar Under Siege With U.S. Deficits Back on Wall Street’s Radar (Bloomberg) America’s fiscal largesse and the specter of wider current-account shortfalls are fueling a renewed wave of dollar bashing. Congress’s bipartisan vote last week to increase spending by nearly $300 billion over the next two years comes on the heels of a $1.5 trillion tax cut that could boost domestic demand and the country’s trade gap. Strategists are taking heed, zeroing in on America’s twin deficits as a likely catalyst of continued greenback weakness following February’s brief respite.

U.S. Jobless Claims Decline, Approach an Almost 45-Year Low (Bloomberg) U.S. filings for unemployment benefits unexpectedly declined last week, hovering close to an almost 45-year low and signaling a tight job market, Labor Department figures showed Thursday.

Futures trade higher; earnings in focus (Reuters) Futures pointed to a higher opening for Canada’s main stock index on Thursday, as investors assessed a slew of corporate earnings including Bombardier, Cenovus Energy and Encana. March futures on the S&P TSX index were up 0.23 percent at 7:15 a.m. ET. Canada’s main stock index rose on Wednesday after investor sentiment rebounded following a bullish U.S. inflation report and energy stocks rallied on strong oil prices. Dow Jones Industrial Average e-mini futures were up 1.01 percent at 7:15 a.m. ET, while S&P 500 e-mini futures were up 0.57 percent and Nasdaq 100 e-mini futures were up 0.7 percent.

Bombardier profit tops estimates on rail strength (Reuters) Canadian train and plane maker Bombardier on Thursday beat quarterly profit estimates, driven by an improvement in both sales and margins in its rail division. Bombardier is in the middle of a five-year turnaround plan to cut costs and boost margins, after years of heavy investments in two new aircraft programs pushed it to the brink of bankruptcy in 2015.

Home Capital Q4 profit sinks 40%, CEO says lender ‘turned the corner’ (BNN) Home Capital Group’s CEO is telling shareholders his company has “turned the corner” after weathering a run on deposits that pushed the lender to the brink last spring, but the company’s performance in the fourth quarter of 2017 illustrates the profound impact on its growth and bottom line. Home Capital’s profit in the last three months of 2017 sank 39.6 per cent to $30.6 million, or 38 cents per share. The company attributes the year-over-year profit erosion to lower loan balances and securitization income.

Overnight markets

Overview: US 10yr note futures are down -0.052% at 120-09, S&P 500 futures are up 0.44% at 2708.75, Crude oil futures are down -0.18% at $60.49, Gold futures are down -0.24% at $1354.7, DXY is down -0.45% at 88.724, CAD/USD is up 0.05% at 0.8001. 

US Economic Data

Canadian Economic Data

Disclosure and Disclaimer

The following sources of information have been, or may have been, used partially or in their entirety to compile the herein provided CTI Capital Securities Inc. (“CTI Capital”) ‘Morning Comments.’ CTI Capital believes these sources to be generally reliable, however, as said sources are varied and from third parties, CTI Capital cannot guarantee the accuracy or completeness of said information: Canadian Press (CP); Bloomberg News (BN); Wall Street Journal (WSJ); Stone & McCarthy Research Associates (SMRA); New York Times (NYT); Financial Times (FT); Market News International (MNI); Globe and Mail; Associated Press (AP); CNW Group (CNW); Reuters; Business News Network (BNN); Market Watch; and others.

Ivan Greenstein, Stephan Buu, Hugues Savard

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

Tel : (514)-861-0240
Fax: (514)-861-3230